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Revealed: How 3D Systems Corporation Views Competitive Threats

During 3D Systems' (NYSE: DDD) 2014 first-quarter-earnings call, it came to light how the 3-D printing giant views competitive threats from Stratasys (NASDAQ: SSYS) and Hewlett-Packard (NYSE: HPQ) . Although mindful of the competition, 3D Systems believes its business is more vertically integrated, and therefore gives it a first-mover advantage over the competition.

Oh, the irony!In an effort to broaden its horizons, Stratasys recently made a greater push into the 3-D printing service bureau space when it purchased Solid Concepts and Harvest Technologies, two leading independent 3-D printing service providers in the U.S. Together, with its existing Redeye 3-D printing service bureau, Stratasys will consolidate its servicing operations into a streamlined solution, offering a wider range of 3-D printing services, including small batch direct manufacturing with metal alloys.

For Stratasys, the greater push into the servicing space makes a lot of sense because it diversifies its technology portfolio, broadens its manufacturing expertise, builds out its sales channel, and potentially expands its customer base. The irony with this move is that Stratasys only sells 3-D printers based on two primary technologies, and in order to become a fully streamlined 3-D printing service bureau, it likely has to adopt 3-D printing technologies from 3D Systems, which offers seven different technologies under its umbrella.

According 3D Systems CEO Avi Reichental, the service centers Stratasys purchased were "by and large" already using its stereolithography, selective laser sintering, and direct metal 3-D printers. In other words, the potential exists for 3D Systems to win future purchase orders from Stratasys as it streamlines and grows its service operations.

It's complicatedAs far as Hewlett-Packard is concerned, Reichental acknowledged that it takes HP very seriously because it has "unlimited resources, capabilities, and technologies." As terrifying as this sounds to 3D Systems investors, Reichental doesn't underestimate the high level of complexity required to become a meaningful and relevant 3-D printing player in the design and manufacturing world. Realistically, it'll likely take years until HP can reasonably be considered a formidable competitor.

In Reichental's view, a multi-faceted approach involving different 3-D printing technologies is the only way to make a big impact in the space. Emphasizing a diverse 3-D printing portfolio makes sense from a business perspective because different 3-D printing applications are best suited for different technologies. The technology needed to produce a titanium medical implant device is dramatically different than technology that produces plastic automotive dashboard prototypes. The company with the most diverse 3-D printing portfolio can cater to the most 3-D printing applications.

Still, investors should continue to monitor Hewlett-Packard's entry into the space, only because HP has deeper pockets than what the worldwide 3-D printing industry generated in annual sales last year.

A first-mover advantage? 3D Systems believes it has a first-mover advantage over the competition because no other 3-D printing company offers as expansive of a 3-D printing portfolio. In order to subscribe to this statement, deeper vertical integration will have to become an increasingly predominant theme throughout the 3-D printing industry so that competitors would have no choice but to build or acquire a broader portfolio. If the industry does in fact move in this direction, it would put 3D Systems and its already established portfolio of seven 3-D printing technologies in a rather opportune position while the industry mobilized.

The jury may still be out on how this will all shake out, but Stratasys' recent emphasis on services and diversification certainly puts some weight behind this line of thinking. Going forward, investors should watch how 3D Systems deepens its level of integration and continues to differentiate itself from the competition.

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As a prior employee of 3D Systems states that they put out products knowing that they are flawed, along with approx. 20 other employed and ex-employees, 90% say they would not recommend a friend work for 3D Systems, not to mention inside rumors about how Formlabs is in bed with 3D Systems, all makes for reasons to wonder just how long will 3D Systems last against deep pockets. One can Google "3D Systems rate this employer" to read about internal problems 3D Systems seems to have amongst its employees

3D systems has been buying other companies, at an incredible pace, and consolidating. There will always be bitter employees of the purchased companies. If you think differently, you have never worked for a company that has been bought. A couple of disgruntled employees is to be expected.

As well, 3D is in a stage of rapid growth. Most folks can't imagine the stress of working for a company that is growing at this pace. Some people thrive on it, while others get upset that lunch hour has become a thing of the past.

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